General Motors said Monday it would launch a new, $5 billion share buyback, and put forward a more detailed plan for capital allocation that promises investors the potential for further cash returns.

GM said it had reached a deal with an investor group that averts a proxy fight over its balance sheet and governance. As part of the agreement, investor Harry Wilson will drop his effort to get a seat on GM's board.

Wilson on Monday praised the company's capital plan, which offers investors a more transparent view of GM's cash investment proposals than previously disclosed.

GM also confirmed Monday it will boost its quarterly dividend to 36 cents a share from 30 cents previously. It had disclosed plans to raise its dividend last month.

In all, the actions should return about $10 billion to shareholders through 2016.

The auto maker outlined its plans for managing cash as part of a deal that averts a battle with an investor group that last month challenged its hoarding of cash in what the company called a "fortress balance sheet."

"I think Mary Barra is a pretty class act," Appaloosa's David Tepper told CNBC. It's been well-known that GM has not been the best allocator of capital over the years and they showed today they have a compensation scheme that is tied to allocating capital correctly and creating shareholder value and they made it transparent."

Some investors had expressed frustration with GM's approach as its shares traded in a range near $33, the price set at its post-bankruptcy initial public offering in 2010. In premarket trading Monday, shares were up 2.6 percent at $37.78.

"It happened quickly because they were ready for it...they were on their way to this," Tepper said of Monday's announcement. "We probably accelerated it."

GM had built up roughly $25 billion in cash as its sales and profits rebounded following its 2009 government-led bankruptcy.

But from now on, GM said it would aim to keep $20 billion in cash on its balance sheet and return free cash flow beyond that to shareholders. The framework depends on GM maintaining an investment grade balance sheet.

GM Chief Financial Officer Chuck Stevens said $20 billion in cash should be enough to allow the automaker to manage through a recession, and he said GM would try to work that minimum cash level down over time.

That suggests the company could eventually return more cash to investors than outlined on Monday.